Copyright September 2010 Maravedis Inc

1 Executive SummaryIndia is clearly sitting on the cusp of the next great telecom revolution: broadband. With a currentpenetration level of less than 1%, the nation eyes a potential 10% penetration over the next fiveyears. The biggest indicator of the fact that the wheels of broadband have been irrevocably set inmotion is the long overdue auction for 3G and BWA spectrum which finally completed in June2010. The government laughed its way to the bank as it surprised itself with an unexpected US$23.5 billion in license fees after successfully auctioning 3G and 4G spectrum airwaves.Spectrum-starved Indian carriers bid aggressively at the 3G auctions to circumvent spectrumshortfalls and to have a chance to start cashing in on the growing data-driven 3G and 4Gbusiness opportunities.

While no single operator won a pan-India 3G license in the summer 2010 auction, sevenoperators won licenses for select 3G circles. Reliance Industries won a pan-India BWA licensethrough its acquisition of Infotel and six other companies won select BWA circles. BSNL andMTNL, the two government owned companies, were awarded pan-India 3G and BWA licenseearly 2009 on the condition that they match the winning bid when the licenses were awarded.This was certainly not the best thing for the incumbents as the auctions sent spectrum pricessoaring, forcing MTNL to empty its cash reserves to acquire 3G licenses, and causing BSNL topost losses for the 2010 financial year.

BWA licensing turned out more surprises than just the return of Reliance Industries; it alsobrought Qualcomm to the forefront of the technology battle for BWA supremacy, as it acquiredBWA licenses in Mumbai and Delhi. Unlike Intel, Qualcomm took a pro-active stance with anupfront investment of US$ 1billion to insure its relevance in Indias next telecom growth engine:broadband access.

Thus far, India has had virtually no broadband wireless market worth mentioning (except for a3.3GHz licensed band and unlicensed 5.8GHz / 2.4GHz band). Thus the 9.2 million broadbandsubscribers (as at June 2010) were largely driven by incumbent ADSL services, with about 0.9million data-card service customers (2G and EVDO users from Reliance, Tata and MTS). For acountry with 620 million cellular users, a broadband penetration of less than 1% is cause forconcern and hence and a huge opportunity.

Copyright September 2010 Maravedis Inc

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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th EditionAlthough spectrum auctions were delayed by more than two years, perhaps now the market isbetter prepared than ever before to take on the broadband opportunity. With an install base ofover 75 million PCs, and a notebook volume growing at about 22-25% annually, more householdsand businesses are going to be computer and Internet enabled than ever. Even more exciting isthat this data revolution may be different for other reasons: the dominant Internet access devicewill not even be a computer, but rather a smartphone or other mobile internet devices.

Devices, Demographics and Data Drivers:

A dramatic increase in device features, accompanied by a steep drop in prices, suddenly appearsto be creating a large, captive, IP-enabled user base. Well-funded, unknown players likeMicromax, Karbonn, Lemon and Zen captured about 11% handset market share in the last 12months. Blackberry-like smartphones, QWERTY keypad and Wi-Fi enabled devices are floodingthe market creating a captive IP-enabled community faster than expected. 3G devices areexpected to be in the $100 price bracket.

A young and vibrant population has driven India to be one of the fastest growing marketsworldwide for social networking applications such as Facebook, Orkut, and Mig33. Thisgeneration will demand mobile broadband access with higher speeds while on the move. IndiasSME (small and medium enterprise) sector is not far behind, with ARPU from US$ 65 upwards,making it a fast growing business sector especially in non-metro areas.

With the Indian government clearly emphasizing the importance of a national broadbandinfrastructure, including several IT-based initiatives to extend rural education and health programsto reduce the social divide, we expect government agencies to subscribe to broadband servicesand consume more bandwidth over the years.

Managing large cellular subscriber businesses is not a new challenge for a dozen Indianoperators who have found the most innovative means of keeping costs low, outsourcing non-corefunctions including networks, leasing tower infrastructure, sharing cell-site real estate andmanaging energy limitations. At the same time, building capacity in a market that is still adding inexcess of 15 million 2G subscribers a month, and increasing coverage to 600,000 villages wherenational ARPU averages US$ 3, is perhaps not for the faint hearted. Still, broadband penetrationhovers under 1% and there is a huge perceived opportunity.

While the nation struggles with runaway inflation, over a quarter of the population still living onless than a dollar a day, and a yawning divide in the cities that threatens to explode, theCopyright September 2010 Maravedis Inc

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India 4G and Cellular Market Analysis and Forecasts, 2010-2015 4th Editiongovernment is hoping that a broadband revolution will distribute prosperity more equitably, shrinkthe digital divide and empower a rural economy that could leapfrog to the next level.

Select Key Findings:

The Indian market has the potential to reach 95 million broadband subscribers by 2015,largely driven by 3G WCDMA/EVDO and BWA which will constitute 80% of the pie. Weexpect that about 40 million 3G data users (USB dongles, 3G data card / modem) will bedriving the mobile broadband revolution by 2015.

We believe that TD-LTE will initially struggle to gain a foothold and will not shipcommercially in India until 2013. After that, TD-LTE technology penetration will increaserapidly depending on the richness of the eco-system of vendors, device firms, IPlicensing and pricing policies adoption, and operator device bundling, to an estimated 4.9million subscribers by 2015.

Considering the latent demand for broadband in the country, we expect that operators willadopt a WiMAX now, TD-LTE later type of approach to kick start network roll outs. Weestimate that the WiMAX 802.16e user base will grow to about 28.5 million by 2015. Still,this base could potentially migrate to TD-LTE if the latter offers compelling economicsand feature performance to operators as well as users.

We observe that in the last 12 months, BSNL has been the biggest investor in WiMAXinfrastructure [802.16e] in India while Tata and Reliance have not expanded their WiMAXbase [3.3GHz] since Jan/ Feb 2009. Our estimate is that the total Indian BWAaccumulated subscriber base including unlicensed and fixed wireless is about 0.6 million,with BSNL alone accounting for about 0.2 million subscribers.

Our estimate is that cumulatively over 500,000 BWA base station sectors will bedeployed by Indian BWA operators by 2015. During this process over the next five years,infrastructure vendors have an opportunity to sell over US$ 1.5 billion worth of BWA BTSequipment.

Copyright September 2010 Maravedis Inc

We estimate the current data card market in India to be about 0.9 million users Thiswindow will continue to expand until 3G data card / modem services kick-in (expectedsometime Jan Feb 2011), after which the 2G data card market will quickly perish makingway for high speed data services.

In-building coverage and RF optimization, shortage of a trained RF work force, crammed

tower space, and power supply shortfalls will plague the industry within urban complexesand central business districts.

We caution that the market potential for over 95 million broadband consumers is dependent onthe creation of a rich, vibrant applications industry in the country. The entry of low-cost, highfeature devices and availability of sub-US$100 3G devices eliminates concerns about devicebarriers. Passive infrastructure sharing (and possibly active infrastructure sharing sometime by2011), risk-reward sharing modes of network outsourcing and managed services will result inpartnerships that will enable high-quality broadband service delivery. However, adequatenumbers of business / enterprise and commercial applications targeting vertical and governmentsectors must also be developed and deployed quickly in order to entice users to rapidly adoptpremium ARPU 3G services and avoid the revenue shortages experienced with existing 2Gsubscribers who generated limited data activity due to poor QoE (quality of experience] and lackof rich content applications.

Apart from wireless broadband technologies discussed in detail throughout this report, there willbe a range of wire-line broadband technologies such as cable and FTTX / optical technologiesthat will contribute to the estimated 96 million broadband subscribers. Some of thesetechnologies are dependent on government approvals of ambitious fiber optic projects which arebeing discussed.